Category Archives: Fraud Investigations

IC3 Latest Scams

 The Internet scams never end. Here is a link from the Internet Crime Commission’s website

Current and ongoing Internet trends and schemes identified by the Internet Crime Complaint Center along with its description:

Auction Fraud
Auction Fraud — Romania
Counterfeit Cashier’s Check
Credit Card Fraud
Debt Elimination
Parcel Courier Email Scheme
Employment/Business Opportunities
Escrow Services Fraud
Identity Theft
Internet Extortion
Investment Fraud
Nigerian Letter or “419”
Third Party Receiver of Funds


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Alleged NC Ponzi Schemes

Charles Ponzi (March 3, 1882–January 18, 1949)...
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According to the Smithsonian,  “Borrowing from Peter to pay Paul is a scheme made famous by Charles Ponzi.”

Many of these computer-savvy crooks have taken their cue from an Italian immigrant named Charles Ponzi, a dapper, five-foot-two-inch rogue who in 1920 raked in an estimated $15 million in eight months by persuading tens of thousands of Bostonians that he had unlocked the secret to easy wealth. Ponzi’s meteoric success at swindling was so remarkable that his name became attached to the method he employed, which was nothing more than the age-old game of borrowing from Peter to pay Paul. The rules are simple: money taken from today’s investors is used to pay off debts to yesterday’s investors. Typically, these investors are lured by promises of exorbitant profits—50, even 100 percent. Often, they are coached to recruit more investors to enrich themselves further. The problem is that there is no actual investment going on; the only activity is the shuffling of money from new investors to old ones. Everything is fine until the scheme runs out of new investors and the whole house of cards comes tumbling down.”

The Charlotte Observer provides a breakdown of 5 Ponzi Schemes. Click here

For more about NC Ponzi Schemes,  read the following story from the Charlotte Observer

Authorities: Ponzi scams unraveling with economy

By Kirsten Valle
Posted: Friday, May. 29, 2009

Investigations surge as times spur questions from investors about where money is going.

Following the headline-grabbing Madoff case and stock market meltdown, authorities say they’re investigating a growing number of investment-fraud cases and finding common threads. The scammers usually live large, spending millions on sports cars, sprawling homes and lavish lifestyles. They target members of the same community, church or ethnic group.

The schemes thrive on investors’ greed, promising rates of return of 18-20 percent or higher. More recently, they’ve capitalized on fear, too, luring investors who wanted out of the volatile stock market. Many investors are retired or nearing retirement.

There have been at least four high-dollar investment-fraud cases in the Charlotte area in the past year – and authorities warn there might be more to come.

To read more about the unraveling of the Ponzi Schemes , click here.

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Fraud Investigations-13 Schemes to Know

Large image of an ATM Photographed inside a :e...
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From Bank Information Security

May 26, 2009 – Linda McGlasson, Managing Editor

Here are 13 of the most prevalent ruses

#1 — Credit Bust-Out Schemes By definition, credit bust-out schemes are a combination of a credit and fraud problem, although many organizations are not always sure where the losses sit – or who might be the party responsible. How it works: According to Michael Smith, manager of the Fraud and Market Planning division at Lexis Nexis, consumers apply for credit from lenders using similar last names, oftentimes Eastern European or Balkan, in an intentional effort to capture financial access vehicles to cause delinquency.

#2 — Customer Loan Account Takeover

This type of fraud occurs online, and a recent case study related by Avivah Litan, distinguished analyst at Gartner Group illustrates how customer loan account takeover happens.

#3 — Corporate Account Takeovers

Corporate account takeovers are becoming more prevalent says Gartner’s Litan. “Corporate banks are reporting that criminals are targeting their cash management customers and moving money out of their accounts via innocent consumer accounts,” she says. The owners fall for phishing e-mails that promise lucrative commissions for participating in the schemes

#4 – Cross-Channel Call Center/Online CD Purchase Scam

A fraudster purchases multiple CDs online from one bank, funded by ACH Transfers from multiple compromised third-party accounts at other institutions, says Ori Eisen, former worldwide fraud director for American Express. How it happens: The perpetrator contacts the Call Center within 48 hours of the CD purchases to cancel the CDs and transfers the funds to yet another institution to liquidate. “Variable email addresses are used in an effort to mask identity,” Eisen says. “Current procedures and safeguards at most financial institutions may not preclude the success of this type of cross-channel attack.”

#5 — Wire Fraud Account Grooming

Financial institutions are exposed to very high levels of risk within their online wire transfer processes. “Traditional methods of detection are very labor intensive, yielding high false positive rates and low recovery of stolen funds,” Eisen says.

#6 — In-Session Phishing

A somewhat recent tactic being perpetrated by fraud rings — “in-session Phishing” — has emerged as one of the chief threats to the breach of secured online assets. These attacks utilize vulnerabilities in the Javascript engine found in most of the leading browsers, including Internet Explorer, Firefox and even Google’s Chrome, notes Eisen.

How it happens: Utilizing a host website that has been injected with malware acting as a parasite, this parasite monitors for visitors with open online banking sessions or similar protected asset sites (such as brokerage or retirement planning sites).

#7 — ATM Network Compromises

The industry is seeing breaches at all stages in the payment process, including merchant terminals, the communication links between merchant acquirers, and (worst of all) core elements in ATM networks, according to Paul Kocher, Cryptography Research Institute’s president and chief scientist. “Once the perpetrators have the contents of magnetic stripes and the corresponding PINs, the data is then sold to people who write the data onto counterfeit cards and drain customers’ accounts,” Kocher observes. Because other fraud targets are strengthening their defenses while ATM networks remain a soft target, “we’re expecting ATM fraud losses to grow rapidly, and eventually financial institutions will be forced to switch the ATM infrastructure to chip cards,” he predicts.

#8 — Precision Malware Strikes

The most common defenses against malicious programs work by comparing programs against the signatures of known malware, says CRI’s Kocher. As a result, attackers have learned that they can breach high-value targets’ computer systems relatively easily, provided that their attack software does not spread so widely that antivirus companies get a copy and add it to their databases. “Attackers clearly have their crosshairs aimed at individuals with non-public information about publicly traded companies, sensitive government data, and systems involved in processing payment transactions,” Kocher states.

#9 — PIN-Based Attacks

For the past 10 years, Verizon Business has tracked metrics and statistics from IT investigative cases, including incident response, computer forensic and litigation support, across the globe. The Verizon Business’ just-issued 2009 Data Breach Investigation Report, shows more electronic records were breached in 2008 than the previous four years combined, fueled by a targeting of the financial services industry and a strong involvement of organized crime, says Bryan Sartin, director of forensics and investigative response at Verizon Business.

#10 — Account Manipulation

Aside from the five or six massive individual compromises that took place across the globe in 2008 is a vastly larger population of data breaches, also targeting financials, that garnered little public attention, Sartin notes. “Much of these involve unusually small populations of compromised records, yet massive fraud in terms of total dollar losses, resulting in significant impacts to the institutions affected. By and large, these cases appear in two forms: insider manipulation and application manipulation,” he says.

Insider manipulation involves organized crime groups infiltrating a target financial entity, not through a systems-based intrusion but via its personnel, Sartin explains.  Application manipulation is somewhat different and involves moderately sophisticated application-based attack techniques.

#11 — Fraud Pattern Changes

Fraud patterns changed dramatically in 2008 as a result of both reduced percentage of successful fraudulent transactions and arrest of individuals involved in organized fraud activity, says Verizon Business’ Sartin. The new fraud patterns can be divided into two categories: random fraud patterns and global ATM transactions.

#12 — Foreclosure Prevention Schemes

Homeowners facing the threat of foreclosure and nearing eviction are contacted by these “foreclosure specialists” who promise to work out their loan problems or buy their home and offer the homeowners tenancy. “Unfortunately for the homeowner, the fraudster has no intention of following through with these promises and instead will manipulate the homeowner into deeding the property to them.”

#13 — Builder Bail-Out Fraud

This fraud involves securing funds for condominium conversion or planned community development properties that, unbeknownst to the investor (financial institution), will not be completed, says Butts of the Mortgage Asset Research Institute. The scams entail multiple purchases from would-be investors or false identities on fabricated loan transactions. “Investors are lured by photos or inspections of a few converted units used as models with promises of further rehabilitation of remaining units. Once the contracts are in place, the fraud continues as the perpetrator secures funding for the contracts,” Butts explains. However, she adds, no additional work is done and the investors and lenders are left with incomplete and, in some cases, uninhabitable dilapidated buildings.

For the complete article, click here.

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Fraudulent Claims Rise in Poor Economy

Go Right, Slip and Fall
Image by kleinmatt66 via Flickr

The National Insurance Crime Bureau reports that fraudulent claims increase in poor economy.

Citing data that demonstrates notable increases in suspicious car fires, slip-and-falls, and hail-damage claims, the National Insurance Crime Bureau (NICB) is supporting the notion that a poor economy is causing an increase in fraudulent insurance claims.

According to the NICB, the report “clearly shows an increase in the number of questionable claims related to possible cases of insurance fraud during the past year as the economy continued its downward spiral.” The assertion was derived when the NICB analyzed questionable claims submitted by the more than 1,000 of its member companies. When the results of the first quarter of 2009 were compared to the first quarter of 2008, an increase in opportunistic fraud appeared.

Click here to read the full article.

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Where is the bailout money going?

Below is a link to website Pro-Publica.

It is an independent, non-profit newsroom that produces investigative journalism in the public interest. Our work focuses exclusively on truly important stories, stories with “moral force.” We do this by producing journalism that shines a light on exploitation of the weak by the strong and on the failures of those with power to vindicate the trust placed in them.

Eye on the Bailout

Bailout Recipients

This list shows a breakdown of where the Treasury Department, authorized by Congress, has directed taxpayer money in the ongoing bailout of the financial system. It accounts for both the broader $700 billion bill and the separate bailout of Fannie Mae and Freddie Mac, to which Treasury has set a limit of $400 billion.

This is a list of companies that have been allocated funds. To see a complete list of Treasury’s programs – including those for which no recipient data is available – see our programs page.

Last updated: Apr. 15, 2009. Return to our main bailout page.

For the list click here

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Read Cheryl Thomas’ page-Undercover Investigations

Cheryl Thomas

Cheryl Thomas

Be sure to read Cheryl Thomas’ new page on the blog, Undercover Investigations.

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Bonuses paid to AIG and is this what the payoffs look like?

American International Group, Inc.
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After listening to those “poor pitiful” AIG financial officers, I decided to post why one executive decided to return it

The dollar is certainly not worth what it once was

The dollar is certainly not worth what it once was

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